Focus Returns to Domestic and Stronger Dollar

Market Review

Malaysia: The FBMKLCI (-0.58%) continues its sell-off for another day amid weakening global sentiment after President Joe Biden's recent announcement on curbing AI chip exports to Malaysia; selling pressure was observed in the Utilities and Construction sectors.

Global markets: While the PPI and Core PPI data came in softer-than-anticipated, Wall Street closed on a mixed note as market participants traded cautiously ahead of the CPI data set to be released tonight as this may dictate the rate cut path going forward. The European market closed lower, while the Asian markets edged higher.

The Day Ahead

The local bourse continued its sell-off, dragged down by Utilities and Construction heavyweights. While US PPI data came in softer, Wall Street closed mixed ahead of another inflation data release tonight, where we foresee softer data would indicate easing inflationary pressure, in turn boosting the sentiment in both global and local markets. In the commodities market, Brent crude oil retreated due to profit-taking, trading around USD79/barrel, while gold rebounded to USD2,670/ounce after the softer PPI data. CPO prices hovering around RM4,450, closing the gap from the previous day's trading session.

Sector Focus: Despite Brent oil retreated on profit-taking, we believe the recent announcement of Yinson receiving USD1bn in CapEx could lift sentiment in the Energy sector. With the recent announcement from President Biden limiting AI chip exports to Malaysia, which may cap the upside on the Technology sector, we see trading opportunities in the oversold EMS, OSAT, and ATE players, benefiting from the 'stronger for longer' dollar outlook. Besides, we expect buying opportunities to emerge in the Construction sector, as there are still several packages yet to be announced after Gamuda won the Penang LRT contract, while Property players with large landbanks in Johor could benefit from the JSSEZ initiatives.

FBMKLCI Technical Outlook

The FBMKLCI saw another sell-off after breaking below the MA lines. The MACD Histogram continued to expand negatively, while the RSI approached the oversold level, indicating negative momentum at the current juncture. Resistance is anticipated around 1,591-1,596, while support is set at 1,556-1,561.

Company Briefs

Yinson Production, an indirect subsidiary of Yinson Holdings Bhd (YINSON), has secured USD1bn (RM4.51bn) worth of funding from a consortium of international investors, led by a wholly owned subsidiary of Abu Dhabi Investment Authority (Adia), for expansion. Adia's Platinum Lily B 2024 RSC Ltd, together with funds managed by British Columbia Investment Management Corp (BCI) and RRJ Group, will subscribe to redeemable convertible preference shares (RCPS) and warrants issued by Yinson Production, giving the unit a post-money valuation of USD3.7bn. The agreement also includes an option for the investors to invest USD500m more by taking up an additional 500,000 RCPS within the next 24 months, subject to mutual agreement. The proceeds will primarily go towards supporting Yinson Production's growth in the floating, production, storage and offload (FPSO) vessel market, USD200m will be distributed to its controlling shareholder, which is a wholly owned subsidiary of Yinson. (The Edge)

Mah Sing Group Bhd (MAHSING) said it is confident that its data centre projects will pass through the proposed US restrictions on the export of artificial intelligence (AI) chips. Companies in Malaysia can secure validated end-user designations by adhering to US standards on security, cyber resilience, and human rights, the property developer said in a statement. Mah Sing said that it will ensure full compliance and mitigate potential risks. Mah Sing also noted that its partner Bridge Data Centres is primarily owned by US-based Bain Capital. (The Edge)

The digital bank jointly-owned by YTL Power International Bhd (YTLPOWR) and Singapore-based Sea Ltd has received approval from the Ministry of Finance (MOF) to commence operations, effective Dec 20, 2024. The bank, operating under the name Ryt Bank, will be launched in phases to the public to ensure a smooth rollout, according to a statement. The YTL Power-Sea joint venture was one of five successful applicants that had secured digital bank licences approved by the MOF, Bank Negara Malaysia (BNM) announced in April 2022. (The Edge)

Atlan Holdings Bhd (ATLAN) is paying an interim dividend of 8 sen per share after its third quarter net profit jumped over four-fold, lifted by proceeds from the compulsory disposal of a subsidiary's land in Kedah to the Malaysian government. The company's net profit surged to RM29.93m in the third quarter ended Nov 30, 2024 (3QFY2025) from RM6.47m in 3QFY2024, though revenue dipped 4.02% to RM112.48m compared to RM117.19m. The decline in quarterly revenue was attributed to lower contributions from the group's automotive, property and hospitality segments. The interim dividend declared, which is double the four sen it declared in 3QFY2024, will be paid on Feb 17. Year to date, Atlan has paid 12.75 sen dividend, as opposed to 10 sen previously. (The Edge)

Sunway Property, the property arm of Sunway Group, announced the appointment of Chung Soo Kiong as its new managing director. Chung succeeds Datin Paduka Sarena Cheah Yean Tih - daughter of Sunway Bhd (SUNWAY) founder Tan Sri Dr Jeffrey Cheah - who assumed the role of executive deputy chair of Sunway Group on Jan 2 this year. Chung brings over 20 years of experience in property development and construction within Sunway Group. (The Edge)

Kawan Food Bhd's (KAWAN) plan to set up an information technology equipment joint venture (JV) with several individuals, including its founder cum major shareholder, and current chairman, has fallen through. Talks ceased after Kawan Food and Sun Cheng Leng, Huang Er-Wen, Gan Thiam Chai and Lim Hun Soon @ David Lim failed to arrive at a consensus on revised terms for the JV. "The board of directors of the company wishes to announce that all parties were unable to reach an agreement on the revised terms of the JV. Hence, all negotiations have ceased," the filing read. (The Edge)

Theta Edge Bhd (THETA) said its subsidiary's JV deal with a data-science company to develop artificial intelligence (AI) and blockchain solutions has been terminated. The telecommunications and technology company said its wholly owned unit Theta Innovation Sdn Bhd (TISB) and iStream360 Sdn Bhd have mutually agreed to terminate the JV agreement entered on Nov 21 last year. (The Edge)

Target 1 Sdn Bhd announced that the Securities Commission Malaysia (SC) has given another seven days' extension for the company to deliver the mandatory takeover offer documentation to South Malaysia Industries Bhd's (SMI) shareholders. Target 1 - one of the parties seeking to take the company private - now has until Jan 21 to deliver the mandatory takeover offer documentation to shareholders of SMI, said TA Securities Holdings Bhd in a statement on behalf of Target 1. This marks the second time Target 1 has been granted an extension from the SC to deliver the document. The original deadline was Jan 7, and it had previously been extended for seven days until Jan 14. (The Edge)

Source: PublicInvest Research - 15 Jan 2025